What is SegWit?
Many people use SegWit addresses even though they are not aware what it really is. Neither are they aware of its benefits to the Bitcoin network.
The term SegWit stands for “Segregated Witness”. It is basically a way or technique to cut down the transaction fee for Bitcoin. So if you want lower transaction fees on the Bitcoin network, use a SegWit address (and not the legacy address).
To make it more technical, SegWit moves all of the Signature’s data in the bitcoin block at the end. This means that all the signatures data of all the transactions are clubbed together at the end of the block. This creates more space for the transactions and yet the security of the blockchain is not compromised.
Benefits of SegWit
Well, there are two main benefits of using the SegWit addresses.
- More transactions in less time
- Low fees per transaction
- SegWit addresses are backward compatible
SegWit Addresses Backward Compatibility
Most people think that SegWit addresses can send or receive Bitcoins from SegWit addresses only. This is not true. SegWit addresses are backward compatible which means that you can send or receive Bitcoins also from legacy addresses.
How To Identify SegWit Addresses
The process of identifying a Segwit address is very simple. If you come across a Bitcoin address that starts with 3 or bc1, it is a SegWit address. This is different from the legacy address which normally starts with 1.
Bitcoin SegWit Scalability
We always want faster transactions performed on the bitcoin network. SegWit addresses help in accomplishing this. Not only does the transaction speed increase but also the transaction fee is reduced.
As we know that the number of Bitcoin transactions will increase day by day. This is because more people will be using bitcoin as adoption increases. Consider when every shop will be able to offer payment for things with Bitcoin. You would not want to wait long too for the transactions to confirm. You also would not want to pay a high transaction fee. The Bitcoin lightning network will solve this problem. This however won’t be possible without SegWit addresses. This is the significance and importance of the Segregated Witness in the Bitcoin blockchain network.
So in the nutshell, SegWit is a major improvement of technology of the Bitcoin blockchain with the aim to accomplish faster transactions without compromising the safety of the network.